spends far more per capita on health care than any other nation in the world and that by most of the accepted indexes of health studies we lag behind almost every other industrialized or semi-industrialized nation. We need to look at the quality of the care we are getting. We need to ask ourselves whether the many studies and reports of needless surgery should produce action programs to correct the situation. We should be deeply disturbed by the large numbers of us who end up in hospitals each year as a result of reactions to prescribed drugs-some estimates indicating that as many as 80 percent of these reactions could have been avoided. We need to worry when we are told that as many as 30 percent of all the X-rays taken are either inaccurate or unreadable. We should be demanding far more aggressive measures to see to it that the large numbers of inaccurate or even wrong findings of laboratory tests are reduced sharply and possibly eliminated entirely. How on earth can we expect to get adequate treatment from the health care system if it is based on faulty tests?

If we enact a national health plan which will generate real reforms, we can preserve the best in our present system and replace its worst features.

Those who favor incrementalism completely abandon cost and quality controls and systems improvements. Unless these are built into any plan, the plan will do nothing but exacerbate the problems it is trying to correct.

Incrementalism has been the approach which we have followed in the United States in the last 30 years. It is precisely this approach which has led us to the sad state of affairs in health today. The health security program through seeing all of the problems in relation to each other, and through using the leverage of large funds coming into the system, proposes to begin to integrate the necessary corrective measures in restructuring the system. It is admittedly evolutionary and it will take time to produce progressive change. But it sees the problem as a whole and deals with it in like manner.

Delivering health care to every American depends on the development and organization of the available resources, and an equitable financing system. It depends on the leverage and support of a national health insurance plan which will create the resources and provide the leverage needed for reforms. Health security alone meets these standards.

Many national organizations-religious groups, labor, senior citizens, health professionals and others-have endorsed the principles of the Health Security Act as essential to the legislation vou are considering. The first of these principles is health care as a right, unabridged by any means tests, work earnings tests or any other requirements. We believe that the legislation enacted must:

Provide universal coverage, under one system.

Provide for comprehensive health care services, including preventive care as well as diagnosis, treatment and rehabilitation.

Provide payment in full for all costs of covered services, including the extraordinary costs of catastrophic illness.

Finance all covered services through a trust fund based on payroll taxes and general revenues, administered by the Federal Government. Contain strong quality control mechanisms.

Establish prospective reimbursement of providers to control costs, eliminate duplication and reduce waste.

Assure effective consumer participation and public accountability. Provide resources, development and distribution in a system responsive to community needs.

Of the bills before your subcommittee, Mr. Chairman, only the Health Security Act measures up to these essential principles.

The question of costs was well answered by Dr. Rashi Fein, professor of economics at Harvard Medical School when he said, "New parks, roads or bombers represent money for things the people would otherwise not have. But medical care is different; we are already spending $104 billion, and private expenditures account for $63 billion of that total.

"So the issue is a nonissue. The question can we, as a people, afford national health insurance, really means can we afford to spend what we are already spending-and surely the answer is 'yes'."

Understandably, this subcommittee is concerned about costs to the Federal budget, as well as costs to State and local governments, and to the family budgets.

Our consulting actuary has prepared an analysis of comparative costs of national health insurance programs for future years. Using the methodology developed by the administration, including some assumptions with which we would not necessarily agree, the analysis shows nevertheless that H.R. 21 would, within 4 years, actually save $21 billion annually in national health expenditures in comparison with the catastrophic insurance program. It would save $25.5 billion in comparison with the administration's own CHIP plan. which served as the blueprint for the new AMA bill. And it would save $11.6 billion in costs which would otherwise occur as a result of doing nothing.

The reasons for the savings are not complex. Under the health security bill, all costs would be anchored to budgets prepared and approved in advance. Under H.R. 21, system reorganization would be encouraged, with the concomitant savings in hospital utilization and provider costs which result from the team approach to the delivery of comprehensive benefits. Under other bills, payments to providers would remain open-ended.

We would like to submit this analysis for the record. [Appendix C follows:]

APPENDIX C

COMPARATIVE COSTS OF NATIONAL HEALTH INSURANCE PROGRAMS

TOTAL NATIONAL EXPENDITURES FOR COVERED PERSONAL HEALTH SERVICES FOR FISCAL YEAR 1978 AND FISCAL YEAR 1982 (ASSUMING PROGRAMS IN FULL OPERATION)

1 Fiscal year 1982 cost savings (cost increases) measured against "No program" resulting from cost-containment mechanisms in each program.

NOTES

1. The primary source for these figures is table 2 from "Estimated Health Expenditures Under National Health Insurance Bills, A Report to the Congress, July, 1974." See page 4. These estimates were projected to fiscal years 1978 and 1982 using the following inflation factors:

However, it was assumed that the cost controls in S. 3/H.R. 21 would be effective to reduce costs under that bill from fiscal year 1978 (when 1st effective to reduce costs under these assumptions) to fiscal year 1982 as follows:

Per

2. Induced costs included in the HEW study were distributed among the various categories of services in each of the programs in proportion to expenditures found in table 2 for fiscal year 1975. "Total" column. Thus, the projected costs include induced costs.

3. The projected costs were then distributed by source of financing, using the percentage distribution found in table 3 of the HEW study. No effort was made to adjust the projected figures to reflect the likelihood that, because hospital costs are more heavily insured than other health care expenditures, the percentage distribution would change somewhat over the years under the assumed inflation factors.

Mr. WOODCOCK. With respect to the program costs of health security, Dr. Falk has updated the figures previously given to the Ways and Means Committee as a result of the astronomical increases in health costs which have occurred without health security. They are outlined in appendix C of this statement.

Mr. Chairman, we feel the evidence is clear both in our own social security program and in the Canadian national health insurance program that administrative costs of national health insurance would be reduced by a health security-type program in comparison with the present system of hundreds of insurance companies, each with its own sales force, claims department, reserves, profits, and battalions of underwriters and clerks.

Mr. Weinberger, the former Secretary of HEW, testified before this committee last year that 45,000 to 49,000 additional employees would be required to administer H.R. 21. However, the chairman of the board of the Equitable Life Assurance Society of the United States has stated that 300,000 private health insurance employees would be put out of work if the Health Security Act were to be enacted. While I would be the last to wish to add to the unemployment rolls, we must surely ask whether we can continue to subsidize with limited numbers of health care dollars the tremendous operating and administrative expenses of the health insurance industry.

Those who believe that the best defense is a strong offense will continue to degrade the performance of the Social Security Administration.

The disclosures about SSI overpayments have strengthened the hand of those who would play on the public's concern about one more giant bureaucracy. Overpayments make headlines; causes of the problem are buried inside the newspapers.

This subcommittee is aware of the causes of the SSI situation-a large program superimposed by political appointees upon an efficient agency which is denied the manpower required to administer it, given 11th hour orders changing essential characteristics of the program, and encumbered with deficient State data.

The problem is not that the Social Security Administration is inefficient or callous to public concerns about the expenditure of public funds. Social Security is a model of efficiency whose management practices could well be replicated by private insurance companies.

The problem is not that a new program recruited too many new employees to staff it. Too few are allowed by the political bosses of HEW.

The problem is not that we have a gigantic snafu caused by bureaucracy. The snafu was caused by the political leadership.

It's easy and often politically profitable to criticize governmental bureaucracy, but the members of the Ways and Means Committee know full well that the Social Security Administration suffered no SSI-type snafus as long as its programs were run by dedicated public administrators and not politicians.

In conclusion, Mr. Chairman, let me say that we very much appreciate the initiatives you have taken in moving forward with these hearings and in seeking reasonable solutions to the problem of congressional committee jurisdiction on the issue of national health insurance.

We appreciate the hard work you have undertaken sonal commitment you have made to achieving a nation surance plan which will benefit every American.

Mr. Chairman, we thank you for the opportunity to r

views and are ready to answer questions about our testimony. As. group, we are prepared to answer any questions you may have. [The prepared statement follows:]

STATEMENT OF LEONARD WOODCOCK IN BEHALF OF HEALTH SECURITY ACTION COUNCIL, AND INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW

Mr. Chairman, members of the Health Subcommittee. My name is Leonard Woodcock and I appear before you today on behalf of the five million members of the United Auto Workers' families, and the 80 national organizations which comprise the Health Security Action Council. The members of these organizations number in the millions and represent a broad cross-section of American life. I understand that your Committee will take testimony directly from State and local representative groups of the Health Security Action Council later on in these hearings, and we commend you for opening your hearings to the people who will be most affected by what you do here.

With me today are Dr. I. S. Falk, Professor-Emeritus of Public Health, Yale University, who is Chairman of the Technical Committee of the Committee for National Health Insurance; Melvin A. Glasser, also a member of the Technical Committee and Director of the UAW Department of Social Security; and Max W. Fine, Executive Secretary of the Health Security Action Council.

Mr. Chairman, we are here to testify in support of the Health Security Act (H.R. 21) and about other health care proposals under consideration. We have already testified extensively before the Ways and Means Committee and two Committees of the United States Senate about why we support the Health Security Act. We are grateful to the more than 100 members of this body who are co-sponsoring this important and inevitable legislation. We stand for Health Security. We have fully put into the record why.

We have testified as to what Health Security is and what it is not. We have shown how it will produce urgently-needed changes in the health care delivery system. We have discussed its quality control features, the needs for which are growing even faster than malpractice insurance premium increases. We have provided data about its costs, cost controls and cost saving features, and we will continue to update these data and not be intimidated by those who are deliberately misinterpreting the costs of Health Security.

Your Committee has not yet acted on this urgent problem, but we have hope that the new round of hearings which you are now undertaking will finally produce a Health Security program for all Americans. We support your undertaking and we offer our assistance in helping you to clarify the issues so that your actions will be based on the facts as they exist and not on the imagination and distortions of Madison Avenue hucksters employed by the vested interests. As the problems have grown, so too have their efforts to convince us that no problems exist.

KEY ISSUES

As a result of the Administration's totally incomprehensible position on this issue, not much attention has been paid to the health care problems of the American people in the past year. However, it has been a year in which the health care crisis has grown worse.

The problems of poor distribution of services, shortages of family physicians, and duplicated, disorganized and excessively high cost of services have all intensified.

It has been a year in which millions of American families played Russian Roulette with the lives and health of their children-a year in which 5.3 million of our 13.2 million preschool children were unprotected against the killing and crippling infectious diseases: polio, measles, rubella, diphtheria, whooping cough and tetanus.

It has been a year in which one-third of all pregnant women who delivered in public hospitals had no prenatal care and consequently ran high and unnecessary risks to themselves and their babies.

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